The Economics of Local

The following is taken from an article written for a Milwaukee Newspaper in 2007. It contains some very pertinent facts about the economics involved with supporting local businesses and some encouraging news about local business around the nation. Enjoy!

The Economics of Local

A 2002 Economic Impact Analysis in Austin, Texas, was one of the first major studies to examine the impact of shopping at local businesses versus national chains. It found that for every $100 spent at a local bookstore or CD store, $45 stayed in the local economy. For every $100 spent at Borders, however, the local economic impact was only $13. Astudy in Maine the following year yielded similar results: Shopping local kept three times more money in the local economy than shopping at chains. The studies cite several reasons for this. Proportionally, local merchants tend to employ more local labor and buy more local goods than national competitors, which operate from remote headquarters. Local business owners keep their profits in state, and contribute more to local and state taxes. Local businesses are also more likely to promote local artists and authors.

Those findings may seem intuitive enough—of course local businesses keep more money in the local economy— but less obvious is just how much difference shopping local can make. This year’s San Francisco Retail Diversity Study found that even the smallest shift in customer spending can have a tremendous impact on the local economy. If 10% of residential spending were redirected toward local businesses, the study found, it would give San Francisco a $192 million economic boost and generate nearly 1,300 new jobs. The reverse, the study warns, is also true: If 10% of business were shifted to chains, the cost to San Francisco’s economy would be almost $200 million.

Perhaps not coincidentally, Our Milwaukee is beginning with the goal of convincing city consumers to redirect just 10% of their spending toward local businesses.

Encouraging Signs

Business owners involved in local business alliances in other cities report that these organizations have been tremendously effective. Steve Bercu, president of the Austin Independent Business Alliance, says that in just five years his organization has grown to 350 businesses and earned considerable clout with Austin’s city council. The alliance has moved beyond simple buy-local campaigns, and begun to work on programs that encourage local developers to ensure their new projects reserve space for independent businesses instead of just national merchants.

Stacy Mitchell, the author of Big-Box Swindle and the co-founder of the Buy Local organization in Portland, Maine, which began in 2006, says the group has already changed consumer-spending habits. Almost threefourths of businesses involved with the organization reported that customers are making more of an effort to shop local because of the campaign.

Mitchell says she heard of one Portland bookstore owner who noticed a new customer that soon became a regular presence in the store and one of his best patrons. Eventually, the owner asked her if she was new to the city. No, she responded. She’d lived there for 20 years, but had just learned of the Buy Local campaign from another independent business and subsequently ceased shopping at national bookstore chains.

“The message really clicked for her,” Mitchell says. “I think that’s one of the most important things these campaigns can do. They become an opportunity for local business owners to reach all their customers collectively, and share business.”

In addition to encouraging anecdotes, the city of Bellingham, Wash., has hard numbers to show that its Think Local First campaign is working. Astudy released last year showed that nearly 70% of residents were familiar with the program, and that 58% were choosing to shop at local businesses more deliberately than they were three years ago. In general, independent business owners say these buy-local campaigns are an easy sell. Their customers are receptive to the message, and even if many may not initially consider whether they’re shopping at local businesses or national chains, all it takes is a gentle reminder for them to change their spending habits.

I was bummed to learn I just missed a Seattle presentation last week from the American Independent Business Alliance, the national hub for these groups. It sounded great and my online exploring led me to the story linked above.

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